The FT500 provides an annual snapshot of the world’s largest companies, ranked by market capitalisation – the bigger the value placed on the company by stock markets, the higher its ranking.

Market capitalisation is the number of shares the company has in issue, multiplied by the market price of those shares on the day the snapshot is taken. This year the snapshot was taken on March 28.

There are many ways to measure corporate size but the FT’s focus on market capitalisation sets it apart from other league tables. A common method ranks companies by their annual revenues, an approach pioneered by Fortune magazine in its US 500. A drawback to this approach is that it does not allow proper representation for banks and other financial services companies. It also tends to exaggerate the importance of companies with very high turnover, relative to profits, such as some trading businesses. In addition, a company’s sales are not a reliable guide to its profitability or dynamism.

Companies can also be ranked by profits, but the problem here is the under representation of groups that have taken one-time write-offs, which distort their performance for a particular whole year, or which have moved into loss.

All these methods have a timing problem: they are based on information in annual reports, publication of which is staggered throughout the year. Comparisons, therefore, are not like for like.

Market capitalisation overcomes many of these problems – it is taken at a single point in time; it includes loss makers and it gives a proper weighting to financial services companies. It also has the advantage of being forward-looking: share prices incorporate investors’ expectations about a company’s prospects.

And at a time when investors are pressing companies to pay more attention to shareholder value, market capitalisation is a measure of increasing importance.

Like any measuring device, market capitalisation has drawbacks. Because market value reveals what shareholders think a company might be in future, not what it is today, many companies included in the rankings are newcomers, who may be forced to exit just as quickly. Given that markets are volatile, the rankings would be different if they were calculated on any other date.

Market capitalisation rankings also exclude companies without a stock market listing, or with very few shares in public hands, and thus leave out large family and state-owned businesses. Finally, the figures have to be converted into a single currency to permit comparisons.

The FT uses the US dollar, except in the UK table where sterling is used. This means that rankings will be affected by exchange rate movements against the US currency.

Download the Global 500 table in PDF format or alternatively click here to view.

EMAIL THIS PRINT THIS MOST POPULAR